Tech Sell-Off Hits Amazon, Intel and AI Trade as Crypto Hack Rattles Binance 10/30/26

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1:00Dominic Chew: A tech sell-off underway. I'm Dominic Chew, and this is your Morning Call.

1:18Dominic Chew: Good Friday morning. I'm Dominic Chew, and for Morgan Brennan today, we are tracking a major market sell-off underway across big technology stocks right now. U.S. equity solidly on the offer. You can see here the tech heavier Nasdaq 100 trade is the epicenter of all of it. We are implied lower by roughly 575 points. Meanwhile, the S &P 500, the broader measure, implied lower by 62 points. And the not as tech heavy Dow Jones industrial average is implied higher by roughly 100 points. Now, Intel and Amazon among the biggest laggers ahead of the opening bell on the back of weaker earnings reports and even weaker outlooks.

1:57Dominic Chew: We'll have more on that big trade coming up in just a moment. Treasuries with the 10-year yield now on a seven week low or just about there. You can see the benchmark 10-year note yield ticking lower, bond prices higher, 4.925 percent. The two-year note yield, 4.59 percent. And the 30-year long bond, 5.285 percent. Cryptocurrency is very much in focus amid what's being described as the biggest ever crypto hack in history. Some$6.3 billion wiped from Binance's coffers. Prices for Bitcoin right now are down about three and a half percent, 77 ,869. Ethereum, $2 ,225 and change off four and a half percent.

2:38Dominic Chew: We'll keep an eye on those crypto prices more on that story coming up. And energy ahead of earnings from some of the biggest names in the business. Pippa Stevens will be up later on to weigh in on the oil trade. Right now, U.S. Benchmark West Texas Intermediate up one and a half percent to one hundred and three dollars and fifty nine cents. Icebrand crude futures the world gauge one hundred and sixteen dollars and eighty cents up about one and a half percent as well. Well, turning back now to the sector sell off and two big earnings movers at the heart of this morning's action, we are talking about Intel and we are talking about Amazon.

3:09Dominic Chew: We'll start with Amazon. Those shares are falling right now. You can see here to the tune of just about maybe. Well, let's bring up the trade here. I don't know where Amazon is right now, but the trade here is now about six and a half percent lower. Those shares are falling ahead of the opening bell after posting its first top and bottom line miss in four years. That's despite sales actually coming in at the high end of its July guidance range. Now, speaking of guidance, Amazon falling short there to midpoint revenue ranges coming in below consensus estimates, as did operating income for the current critical holiday quarter.

3:42Dominic Chew: Capital expenditure plans are holding steady at$220 billion this year as free cash flow falls deeper into the red, now at a negative$42.4 billion level. And whereas Microsoft and Alphabet had cloud sales to fall back on, Amazon's Amazon Web Services, or AWS, barely topped Wall Street expectations at just under$46 billion, despite showing its fastest growth in five years. and CEO Andy Jassy saying the business cloud could be worth a trillion dollars over the course of the next couple of years. The idea of being able to grow 39 percent with one hundred eighty four billion dollar annual run rate and to grow 40 percent a year on top of that in each of the next two years and ultimately end up as a trillion dollar plus business.

4:34we're going to invest to continue being the leader. We are the leader today in, I'll call it the infrastructure and AI space. And would it be more convenient if this type of acceleration and opportunity happened over 25 years and you could spread the capex over 25 years? Yeah, it might be more convenient, but that's not the world that we live in.

5:00Dominic Chew: That voice, Andy Jassy, the CEO of Amazon. Now, maybe the best news for Amazon today, its rough report is nothing, nothing compared to Intel. That stock is sliding in the pre-market with its 12-cent beat clearly taking a backseat to its ugly fourth quarter forecast. Now, citing continued softness in the global PC market with company CFO saying it sees the PC slowdown lasting through at least the first half of next year, hurt by memory chip shortages and surging prices. Intel also reporting weaker than expected numbers for its data center business hurt by supply shortages and a shutdown of a key factory in Israel.

5:36Dominic Chew: Intel shares, by the way, have lost a quarter of their value just in the pre-market trade today. We'll keep an eye on that. Now, for the current quarter, Intel said it expects adjusted earnings per share of 25 cents on revenues of between 15 and 16 billion dollars. Those are both well below Wall Street expectations. Now, across the rest of the chip complex, we are seeing some of the ripple effects here. You can see NVIDIA shares down 2.5%, Advanced Micro down 6.5%, Broadcom, Micron, Taiwan Semiconductor, all notably in the red this morning, contributing to that tech sell-off trade being seen in the NASDAQ.

6:11Dominic Chew: Now, with all of that in mind, let's see how Europe and Asia are shaping up. Karen Cho is in London with the trade there, and I got to imagine the tech focus is reverberating through parts of Europe as well.

6:25It is indeed, Dom. The real head-scratcher has been the Intel comments on memory chip demand and pricing because you think it would have been positive for some of the Asian players. And Asian equities, though, have been under pressure today. The Alphabet half-a-trillion-dollar wipeout ripping through the tech sector and further declines in Amazon and Intel also weighing on global equities. I mentioned the Cosby in particular. Cosby and also the Nikkei were particularly hard hit with investors in Japan also watching the central bank decision to keep rates on hold. But for me, that head scratcher on Intel, it should have reinforced the demand story for the likes of SK Hynix and Samsung.

7:01Both of those stocks down heavily on the South Korean market. Now, meantime, here in Europe, a new batch of positive earnings isn't enough to offset weakness that we're seeing in those big tech stocks, namely the likes of the ASMLs, the ASMIs. That is weighing on equity markets here. The pop we are seeing it is in other areas. Universal Music Group and Puma are some of the big gainers on the earnings. Elsewhere, it's been a huge 24 hours. We've had news that the ECB president, Christine Lagarde, will be stepping down early next year so she can speak up on matters beyond monetary policy, namely the French election and domestic politics there.

7:33The central bank left its key rates on hold yesterday. Dom, back to you.

7:37Dominic Chew: All right, Karen Jo with the latest there on the tech trade. Europe and Asia trading, thank you very much for that. Now, turning back to that tech trade as well, according to Goldman Sachs, the sector is currently facing its heaviest two weeks of net selling in more than a decade, with Deutsche Bank noting investors have reduced tech exposure to their lowest level in roughly six months. And with earnings from some of the biggest names in the group further failing to fuel enthusiasm around AI, there's indications now that Anthropics IPO may be the spark that Wall Street needs to reignite the rally and put that sidelined cash, whatever there is, to work.

8:12Dominic Chew: Joining me now on that and more is Peter Singlehurst, the head of private companies at Bailey Gifford, a UK based investment manager with more than two hundred and fifty billion dollars in AUM and a private company portfolio with exposure to the likes of Anduril, Calci, Anthropic and more. Thank you so much for joining us this morning. We talked a little bit about the private names in your portfolio, but I'd like to start because it is the news of the day with tech sentiment. because we have seen a pretty decent week of earnings reports that have not been received well. And then we've got two of the bad ones yesterday from Intel and Amazon.

8:52Dominic Chew: How exactly is all of that shaping not just the private markets and public markets as well? Well, Don, thanks for having me. When I see some of these results that are coming out of public companies, What I'm seeing is more evidence of demand for the benefits and the products of AI. The growth that you mentioned at AWS, the disruption that Google are seeing to their own business with consumers increasingly preferring using the AI features of Google over the traditional search function. I think all corroborates the unprecedented level of growth that we're seeing in consumer demand for products of companies like Anthropic, driven by the fact that these are changing the way in which people are able to search, do their jobs, because these products are just getting so much better, so much faster.

9:48Dominic Chew: There is no doubt. I don't think, Peter, I don't think anybody in the world doubts the fact that this tech revolution focused on AI, focused on data centers and cloud is going to be something that is secular and is going to command a massive amount of money and make a lot of money in the coming years. The issue is valuations with regard to expectations. And a lot of that is happening because of AI and the cost it will have to build it out. How does this how do the results that we've seen from Microsoft, from Amazon, from Alphabet and others kind of show you the path for just where investor sentiment is compared to what the benefits will be for the AI trade?

10:31there's a saying in investing that people typically overestimate the short-term impact of technological change but underestimate the the long-term impact and i think that's what we are seeing in this technological change that we are living through now and i think it's what we've seen in previous technological changes i think that as we move into these periods of profound change, one of the most important things to have is focus. And I think focus can come from a number of different areas, but I think it can come from having a raison d 'etre for a business. And so, you know, a company like Anthropic has one reason to exist, and that is to deliver intelligence at scale in a way that is safe.

11:15Now, that's different for a lot of companies. It's different for a lot of scaled public companies where, yes, they're involved in that AI revolution, the data center build out, but they have lots of other reasons for existing, different masters to serve. I think that makes execution more complicated than when you can be a pure play company focusing on doing one thing, as we're seeing from some of the leading foundational model companies.

11:37Dominic Chew: All right. So those foundational model, let's talk about Anthropic. It is a large holding for you guys in your private portfolio. If you look at what's happened this week, it is short term, no doubt, right? But there are some forecasts in place here. How does that shape your view of how Anthropics environment coming public will be if, hypothetically, it does come public sometime in the next few months? Well, we take a very long-term view to investing. And so, yes, the environment that a company goes public in matters. It's not insignificant. But what will drive returns over the long term for investors who choose to participate in the IPO will be the core drivers of success that are within the company's control.

12:24So can they continue to be at the frontier developing models that enterprises use to great effect in their own companies? Can they do that in a way that is safe? And can they do that in a way that continues to see strong margin potential through the company? Now, up to now, the company has delivered on all of these three fronts very effectively. These are the core reasons we invested in the company and why we continue to own the shares. When people look back in five or 10 years, I think people will barely remember what the trading environment was like when Anthropik went public. What they will remember is how the company executed on these core capabilities of frontier intelligence, safety, and the way in which that translates into the fundamentals of growth and profitability.

13:11Dominic Chew: All right. And one quick question for you before we let you go here for the weekend. Anthropik, we know, is going to be groundbreaking. it's a frontier lab. What other parts of the private markets intrigue you the most? Is it all tech and AI? So we're very much growth investors rather than tech or AI investors. And so when you look at the funds that we create for our portfolios, you'll see a variety of exposure to different kinds of growth across different geographies. So you'll see well-known companies such as the ones that you're highlighting here, but you'll also see lesser known companies.

13:44So We've been longstanding owners of a business that recently went public, a company called Bending Spoons. That was a company based in Milan that very few people had heard of. I could also point to a company like Motu down in Brazil or TOS, which is a financial services company based in South Korea. We're finding amazing companies all over the world across industries and sectors. And we're building portfolios of what we believe to be the best growth stage companies in the world. And some are in AI. Some are in defense like Anderil. But it's that plurality of growth and that exposure to companies that are big, growing quickly.

14:1920 years ago, these used to be public companies, but most asset allocators don't have enough money invested in these companies. And it's that exposure, that growth expertise in the private markets that we bring for our clients.

14:32Dominic Chew: All right. A ton more interest these days, Peter, in those private company valuations. Thank you very much, Peter Singlehurst, over at Bailey Gifford, head of private markets there. Thank you very much. Have a nice weekend, sir. We got a lot more to come here on Morning Call, including much more on that tech sector sell-off in play right now. What JP Morgan's head of research, Joyce Chang, has to say. She's joining us in studio later on this hour. Plus, Asia stocks hit hard overnight as Goldman Sachs cuts its target for South Korean equities. The man who made that call is up next. And then later on, more on the crypto hack heard around the world.

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16:55Dominic Chew: And welcome back to Morning Call. To some of this morning's other big stock movers, shares of Reddit are sinking right now, 3.5%. after the social media platform reported better than expected third quarter results, but issued weaker revenue guidance for the fourth quarter as search traffic from Google is shrinking. Meanwhile, Pinterest is dropping after both third quarter results and fourth quarter revenue outlooks missed analyst estimates. The guppy did say monthly active users hit an all-time high of more than$660 million during the quarter as it's gaining traction with users and advertisers thanks to its AI-driven search and shopping tools.

17:29Dominic Chew: but Pinterest shares are down nearly 5%. And Starbucks' fourth quarter revenue is missing forecast due to a lower contribution from China's operations. Same-store sales rising more than 7%, largely from stronger demand in the U.S. Starbucks says popular fall drinks are drawing in customers, and Matcha is now a billion-dollar platform that's primarily enjoyed in the afternoon, which is boosting traffic there during those hours. So now it's Matcha and pumpkin spice lattes all together for Starbucks. Those shares up two and a quarter percent pre-market. Turning back now to the global market sell-off, stocks in Asia hit hard, especially overnight.

18:06Dominic Chew: South Korea's KOSPI falling another three percent in trading, as you can see there. That index is now more than 38 percent off its most recent 52-week high, falling deeper and deeper into so-called bear market territory, which is a drop of at least 20 percent from recent highs. Names like SK Hynix, LG, Samsung, which dominate that index, are leading the charge lower amid the tech-driven sell-off. So joining me now is Timothy Moe, Chief Asia-Pacific Equity Strategist and Co-Head of Asia Macro Research at Goldman Sachs, fresh off of his call, cutting the firm's 12-month price target for South Korea to 9 ,000 from 12 ,000.

18:43Dominic Chew: Tim, that is a very big cut in your expectations for price movement. Can you take us through what the biggest underlying factors were, Tim, for that downgrade to such a degree? Yeah, sure. So, I mean, it looks significant, but I think it's important to explain the logic here. So the underpinnings for that call were basically are the very, very strong earnings growth that Korea is delivering, which is about at the market level, 350 percent this year. 350, you didn't mishear me, which is a record high for any market in Asia over the last 35 years. So you have this extraordinary profit growth this year.

19:20And if you just ride those earnings and we think another 20 plus percent next year and our target at the previous 12 ,000 multiple 12 ,000 target, the multiple on that was 7.2 times forward earnings. So which is, by the way, below where the market typically is peaked during past cycles. So we thought we were actually that was very logical underpinnings largely driven by by earnings and with a conservative price earnings multiple target on that. I think what's happened clearly is that the market is unlikely to be pricing the underlying earnings the same way. And so the exercise that we've been through and what kind of drove us to get to the lower but still the lower 9000 target, which is still 60 percent up from here.

20:02So we still are constructive, is that when volatility is elevated, that maps onto a lower risk appetite in the market, either in the form of retail investors who have been hurt by the decline or in the form of foreign investors who have to cut positions in order to manage position size relative to the increased volatility. So if you take that into consideration, then we will lower some of the parts multiple for both the semi-stocks as well as the non-semi part of the market. And that leads us to take a more conservative view, really trying to gauge what the market may be willing to price. But I want to be clear, we haven't changed our earnings numbers at all, Dom.

20:40We still are expecting the numbers which I just quickly quoted. And if you'll permit me, I just want to note another thing, which is that we've asked the question, and this was the core of our report, what is the market pricing in at the current level, particularly for the semiconductor stocks, which are about half the market. And the answer to that is if you look at the way that the stocks have previously traded through different cycles, that the market is effectively implying a 65 % cut to next year's consensus earnings for the semiconductor stocks, which we think is way too negative given the indications of very strong continuing demand and the longer term contracts that the semi-stocks have, and the fact that both Samsung and Hynex and their recent earnings numbers, which came out just in the last couple of days, have affirmed that they're sold out through 2028 and even in some cases through 2029.

21:29So bottom line here is we think the market is overly negative, is pricing these stocks down at levels which are extremely discounted relative to historical trends. And therefore, we think there's still a significant upside in the market, albeit not as much as we thought before, because we think the market may not validate the underlying fundamentals as constructively as we previously were expecting.

21:49Dominic Chew: Hey, Tim. Okay. So there's two words I want to focus in on because it's, it kind of resonates a little bit more with me vis-a-vis the South Korean markets in particular. You mentioned cycle, and then you mentioned semiconductors. Now the South Korean index is very much geared towards semiconductors. We know this, but it's very much geared towards a certain type of semiconductor. And that is the memory chip side of things. We have seen memory chip cycles play out over the years in the past. How fair is it for an investor abroad to look at previous memory chip cycles and the stock movements associated with them and then translate that or extrapolate that into the South Korean COSPI?

22:30So look, it's a super question and it's the question. And this is where we have a view and we understand what the historical patterns have been. But look, the bottom line is we think there's a stronger and longer cycle than we previously had. And we also think there are reasons, which I'll mention in a moment, for why we think that when the cycle does turn over, that it may not be as significant or as precipitous on the downside as it has been in the past. Now, I know that some of the most dangerous words in each language are this time is different, but we do think that there are good reasons why things are somewhat different this time.

23:03And the key reason really, and this is the core to our view, is you've got this very substantial expenditure growth taking place in token demand globally. Quick statistic is that we think there's going to be a 24 times increase in global token demand between 26 and 2030. That is what's driving hyperscale investment in the U.S., and that's the key demand signal for the Asian upstream supply chain, which memory is a significant part of, but others, you know, foundry, MLCCs, et cetera. If you look at the supply ramp relative to that demand, we think this year we are at a record undersupply for both DRAM and HBM, and we think next year will be even deeper all-time record.

23:39And 2028 will be also very significantly undersupplied. And although we don't have formal numbers, we think 29 and 2030 will also be in short supply. So this would therefore be a longer cycle than we've had before. And that suggests that we need to be mindful of applying historical patterns to the future. And we think the market is overly pricing a negative view on the cycle. Ergo, we think that the risk reward here is to the upside.

24:03Dominic Chew: Gotcha. Okay. So it's not going to be exactly the same, but it's somewhat different this time around as well. So, Tim, thank you very much. We appreciated Tim Moe over Goldman Sachs, their head of Asia Pacific equity strategist. I really appreciate it. Thank you very much. We'll see you soon. Have a nice weekend, sir. Thanks. All right. Well, straight ahead on this show, Big Oil is on deck. The two names reporting before the opening that are riding three-month winning streaks and what others are not so lucky in that trade. But first, we're watching shares of Alphabet after its worst day ever as a publicly traded company, losing some half a trillion dollars in market value in just one day alone yesterday.

24:39Dominic Chew: It's down again this morning by just about one half of 1%. Morning call is back after this. Weren't agents supposed to take things off your plate? Building another to handle the others is a bit much. Don't make more work out of work. Gemini is the one agent that knows all parts of your business and actually gets stuff done. You give it a project, close your laptop, and when you come back, the job's finished. No matter your industry or role, your agent has the skills to help every team stay in their flow. Seriously, make work less work with Gemini on Google Cloud. Check response, subscription required.

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26:14Dominic Chew: And welcome back to Morning Call. Chevron and ExxonMobil, two of the world's biggest energy giants, are reporting third quarter results before the opening bell today, with both expected to cash in on higher oil and gas prices over the past three months. But another corner of the energy complex has not been so lucky. Our Pippa Stevens joins us now with more on the laggard in the energy trade. Pippa. Well, let's start here, Dom, with today's earnings because expectations are elevated ahead of ExxonMobil and Chevron's results as oil prices have crept higher, retaking triple digits amid escalation fears.

26:48Now, the street is expecting both companies' EPS to more than double year-over-year, with ExxonMobil saying earlier this month, elevated fuel prices could lift its downstream profits by some$4.5 billion relative to Q2. Now, CapEx and production guidance will be key, since investors have shown they want discipline from big oil rather than fast production response to price movements. ExxonMobil has more exposure to the Middle East than Chevron, so how the company is managing operations there also top of mind, including the ongoing outages of Qatari LNG. Now, together, the two companies make up more than 40 percent of the energy sector, so any movement will have an impact.

27:29And with both stocks hitting records this week, we'll see if investors say, this is as good as it's going to get. We got big prints from refiners Valero and Phillips 66 this week, but both finishing out the week in the red. Those shares have more than doubled on the year thanks to record crack spreads. But some saying the valuations now look stretched and the mid-cycle margins baked in are unreasonably high, given elevated fuel prices could still prove transitory. BTIG noting the group is up nearly 160 percent on the year, by far the best year in the last three decades by Dom, a factor of nearly 2x.

28:07Yes.

28:07Dominic Chew: All right. Pippa Stevens there with the big moves here in big oil. And by the way, Exxon Mobil and Chevron lockstep on a year to date basis in terms of performance. Pippa, we'll see you later on this morning with those Exxon and Chevron results. Now, from big oil to defense, shares of L3 Harris are higher on the day on a down day. In its earnings report yesterday, the aerospace and defense company posted a beat and raised its guidance as well. New CEO Sam Mehta telling Art Morgan Brennan that the maker of solid rocket motors and tactical radios is, quote unquote, seeing demand across the board.

28:39Dominic Chew: L3 Harris, like other contractors, has inked multibillion dollar multi-year deals with the Pentagon to exponentially ramp up production of missile parts. Mehta says he has no doubt that contracts will be fully funded in the coming years. He says, quote, There are questions about what happens to the budget in the event we have a change of political power. Certainly in one House of Congress, maybe both. Maybe one of the few bipartisan issues that's out there is the need to build our missiles and munitions capabilities. Now, L3 earlier this year announced plans to spin its solid rocket motor business off and give the government an equity stake as well.

29:15Dominic Chew: Mayda telling Morgan he's targeting mid-2027 for the IPO, saying, the one that we continue to monitor closely is the valuation of these companies in this IPO market, so we're not necessarily seeing a lot of favorability out there. L3 Harris up fractionally in the pre-market trade. Still on deck for the show here, JP Morgan's Joyce Chang and the Global Tech Sell-Off. A can't-miss conversation on a critical day for the markets overall. Their chair of global research comes up after this. Morning Call continues next. I'm Dominic Chewin from Morgan Brennan. Welcome back to Morning Call on this Friday.

29:48Dominic Chew: U.S. equity futures, I'm going to call them mixed, but you're seeing the bear for a reason. You can look right now. The Dow is implied higher by a modest 50 points, but the tech-heavier NASDAQ 100 trade is implied lower by a whopping 630 points. The S &P lower by roughly 70. At the heart of this selling is Amazon and Intel. The latest big tech names to report results, both down sharply. You can see Amazon down about 6.5%. Intel shares down about 25 percent implied at the opening bell. As the sell off grips most Asian equities, Europe is holding a bit a steadier trade in the early going. Now, you can see here most of that trade is mixed.

30:24Dominic Chew: Ian King has the latest from London. Ian, the tech sell off is reverberating, but it's holding relatively steady across the Atlantic.

30:35Well, up to a point, Dom, I mean, here in Europe, a new batch of positive earnings hasn't been enough to offset weakness in tech. which are weighing on equity markets today. Elsewhere, we've also had news that ECB President Christine Lagarde will be stepping down early next year so she can speak up on matters beyond monetary policy. The central bank left its key rates on hold yesterday. Well, this is what European tech stocks look like this morning. Key names such as ASML and STMicro are under pressure after those disappointing earnings stateside. FTSE 100 bucking the train, that's mainly due to BP's results.

31:08You've got Chevron coming up later today, of course,

31:10Dominic Chew: and Exxon will BP shot the lights out today with its numbers. And that's why the FTSE 100 is in positive territory just now. Dom, back to you. All right. Thank you very much, Ian King, for that. As we head into the final two trading days, the final two trading months of the year, the U.S. major averages are firmly in positive territory with the S &P and the Nasdaq both up more than 12 percent. Not too shabby. But if you look under the hood, things may not look quite as rosy as they seem. Check this stat from the Kobayashi letter. More than 60 percent of the S &P is now in so-called bear market territory, down at least 20 % from their recent highs.

31:45Dominic Chew: Four of the stocks in the Magnificent Seven, four, Amazon, Alphabet, Meta, and Tesla are now in bear territory themselves, erasing a combined$4 trillion in market value since their highs. Kobayashi calling this a quote-unquote stealth bear market. Maybe nothing stealth about it. Joining me now is Joyce Chang, the chair of global research over at JPMorgan. I reeled off a lot of superlatives, some commentary, but you've seen a lot in your research days. How exactly does the market action now compare to some of the other big kind of tech booms or industrial booms that we've seen over the course of the past couple of decades?

32:26Dominic Chew: And are we right to be a little bit worried, I guess? I think you're right to be a little bit worried. And one of the big things I'm focused on is actually the debt markets. just because the AI CapEx financing in the debt markets, I mean, probably about$500 billion has been issued this year. So you're getting some crowding out, increased cost of capital, when you look at what's happening with sovereign spreads as well. So it's not just the equity market. I think what's happening with earnings today is that you had great expectations. So the upside's been smaller than expected, but you're also getting a lot more focus on the increase in input costs and that, you know, how much do they need the debt markets?

33:06Because we haven't really seen issuance come out since about August. And high yield compute index, I mean, it's about 250 basis points wider than the tights that had been at earlier this year. So I think there's much more of a discussion across the whole ecosystem going on right now, not just the CapEx earnings that are coming up today, an unpleasant trading day for the last day of the month for an unpleasant month, but also just like what is the pipeline and what's the ability to absorb all of that issuance and how much debt financing is still to come.

33:39Dominic Chew: I think a lot of questions right now about what's the tail and what's the dog in this kind of a situation here. Now, we know they're all interlinked, but you brought up the idea of debt and how that's kind of reverberating through some of these markets here. A lot of that is also about how investors are setting themselves up expectations-wise, given the debt concerns and given where we see secular massive changes happening with regard to the tech trade. Is it right for this valuation adjustment to be at play right now, only because we've seen a lot of earnings reports coming in from big tech companies that are signaling, yes, robustness ahead, but maybe a little caution with regard to just how much kind of elation there should be?

34:20Well, the first half of the year was all about fear of missing out because all of the forecasts were revised up so much. So even though there's CapEx upside, it's falling short of where expectations are. And the debt part of it has just escalated as far as not just investment grade markets, but high yield markets, private credit, and in a leveraged loan market. So a lot of the questions that we're fielding right now is like on the duration of this, that even though they can see the CapEx growth, how long can this last, particularly when you do have higher rates and higher cost of funding as well playing out across not just the AI market, but other parts of the market and the sovereign debt markets.

35:03And I feel like this fear of missing out now that you've had such heavy issuance and so many transactions in the marketplace, I mean, that has dissipated and you're back to the expectations now. So I don't think this is necessarily going to flip that easily. I think there are going to be more questions on the return on investment, the monetization, the increase in input costs as well. And then the overall macro environment is also part of this, not just the AI companies themselves.

35:35Dominic Chew: This is a very complicated question, but I'm going to try to get at it in as best as I can for live television. Monetary and fiscal issues are both at play with regard to how the AI trade is being viewed in the credit and rates markets. How much will lower interest rates help or hurt or how much will higher interest rates help or hurt this particular thesis around AI, knowing that it's going to be governments themselves, treasuries and central banks that may have to be working independently, but almost together to kind of make this thing happen? So I am not in the camp that thinks that you're going to see lower rates.

36:13I think that the higher and more fragile for longer is here to stay. And that's really off of the fiscal outlook because I don't see any signs of the fiscal deficits coming down. And we've also had a real change in the marketplace as far as more hedge funds, more private sector ownership rather than official ownership of the Treasury. So I think that's going to remain with us. sudden, that is sort of, in addition to AI, independent of AI, there's a bunch of structural factors that are going to be driving this. So when we've taken a look at this, we've seen that when you're a hyper-growth CapEx phase, you can sustain a 5, 5.5 % treasury yield.

36:53But if you go down to something that is more normalized, I mean, that implies actually that you should be at a lower multiple. So you're in this zone right now where it is, will the hyper-growth CapEx phase continue Are we going to more normalized levels? Because I think everybody, the profit margin, you know, earlier this year, everybody got it wrong. It just exceeded it so much. If you look at like look at the second quarter of the year. I mean, you had 13 trillion dollars of wealth gains. 11 trillion was from the equity market in the second quarter of the year. But that's not something that you can say you can extract forward that will continue indefinitely.

37:31Dominic Chew: All right, Joyce, thank you very much. We're going to see you again in just a few moments here as part of the Morning Call crew. But a fascinating conversation, one I think we need to spend more time on. So stick with us, please. Great to be here. All right. A lot more to come in here on Morning Call, including Binance suspending transactions after being targeted at what's being described as the biggest ever crypto heist, cyber heist in history. The details and fallout when Morning Call returns after this break. Welcome back to Morning Call, turning down to a developing story and the price of Bitcoin falling back below the$80 ,000 mark this morning after Binance says hackers stole$6.3 billion from users' wallets in what's being described as the biggest crypto hack slash heist in history.

38:12Dominic Chew: Analysts are pinning the hack on agents from North Korea. In response, Binance, the world's biggest crypto exchange, says it is suspending transactions while it investigates and adding it will cover all user losses related to the breach. Joining me now is Gil Messing, chief of staff over at Global Cybersecurity Firm Checkpoint. This is right in your wheelhouse. How worried should crypto investors be about the fact that this has happened and what can be done to prevent it from happening in the future? It's a great question, which I think everybody is thinking about. But in fact, it's not the first hack.

38:46It's probably the biggest one, the most sophisticated one, the most problematic one, but hardly the first one and probably not the last. And the point of the matter is that as far as we know about this attack so far, It actually happened quite easily. And what happened there can happen everywhere. If they're hacking a computer of an employee and the employee have certain privileges and they can get access into the system, that can happen in a bank, in a law firm, but also in a cryptocurrency platform. So, in fact, the most important thing that people should understand is the fact that if you don't do the right things within your infrastructure, making sure that there's enough prevention effort inside and you can actually mitigate the hack, then this actually could happen.

39:26And if it happened in 20 minutes, think of what happened if they have more time. The lesson here is for everyone. You need to have the right mitigations within your infrastructure and have like a zero trust approach. Because if you do that, even if there is a hack, some things are there to prevent it. Some sort of checkpoints are there to prevent it. And it didn't happen now, so it seems.

39:44Dominic Chew: What can be done for everybody out there who's got a digital wallet, not necessarily on Binance, but anywhere, about preventing this kind of thing from happening? I would put the emphasis not so much of the users. There are things they can do, but also on the platforms. I think the big questions everyone should ask themselves is, what do the platforms can do to support preventing any kind of attacks on us and our wallets? Because at the end of the day, if someone gets an access to a wallet and gets everything and moves it to another wallet, which it seems to be what happened here, then the big question is, what do the platforms can do to stop it?

40:17And there are things they can do. Think of it as putting some checkpoints within the process of how one wallet is not connected to another and things can be prevented in the middle. And the platforms can and probably should be doing more. It can start with the employees. If employees can be hacked, but what do you do as a company if your employee is being hacked? What can you do to make sure that the employee that's hacked doesn't have the privileges and the rights to get into the systems? Once it's inside the systems, how do we prevent the attacker from going inside the system? So this kind of approach is where he says hacks can happen, but how do I mitigate the risk and minimize this to minimum?

40:48I think that's what the platforms should do. And in terms of the users of the cryptocurrencies, currencies. Binance and others said that they will refund the money. I hope they will. And I think that being very cautious there is the number one thing everyone should do, and especially the platforms that are mitigating all of these kind of transactions. That's happening in the traditional world of the banks and the regular currencies.

41:08Dominic Chew: All right. Gil Messing at Checkpoint with the latest here on the Binance hack. Thank you very much. We'll see you soon, sir. Stick around here. The morning call is up next. We'll be right back after this break. Welcome back. Time now for your call sheet. The crew members assembled today are Stephanie Guild of Robinhood Markets, Martina Norton of Empower and Joyce Chang from JP Morgan still with us right now. We had a whole plan for this, but it's all going out the window because the tech sell-off is now front and center. Joyce, you're here with me in front of me right now. Let's talk a little bit about just why the markets are reacting the way that they are to Intel and Amazon.

41:39I think, first of all, you had just great outsized expectations based on some of the quarterly earnings. And you didn't have as much debt issuance, which has also been another weight on the market. So earlier in the year, there was this thought that, well, this is going to continue. The duration will continue. But you're getting tests and pullbacks. The positioning has been part of it as well. But I think there's still an AI capex boom, but not as much upside as some people had expected and much more concerns about the cash flow and the debt financing piece of it. Because it's not just this tech sell off, it spreads widening as well.

42:13Dominic Chew: All right, Stephanie, sentiment is a huge part of this story as well. We had mentioned some of the commentary about stealth bear markets. They're not really stealth right now. Tech is front and center for it. How exactly are investors at you and traders on your platform reacting to some of this kind of tech upheaval that we've seen over the past couple of weeks? I've been looking through the last couple of weeks of trading, and I would say last week they actually were selling a lot of the hyperscalers. So perhaps going into this week, they were better positioned. But I have noticed in the last couple of days they've actually been using the weakness as an opportunity, not necessarily into Intel, but in some of the memory names and then also in some of the hyperscalers like like Amazon and Google as well.

42:59Dominic Chew: And Marta, I mean, this, I guess, movement has been very big in terms of its scope with regard to AI. Has it changed how some of the folks on your platform are viewing their investments? I mean, you have and run one of the biggest retirement platforms out there. Are people now either day trading or making adjustments to portfolios because of what they're seeing in the marketplace right now? You know, what's interesting about the AI theme is even though investors have been really enthused about it, I think average Joes and people with retirement accounts have been a little bit more leery around AI.

43:37It's kind of a mixed sentiment, I would suggest, for a lot of the folks I talk to. So I think there's been a little bit lighter exposure in some of these areas related to AI and maybe some kind of more reduced expectations. So I don't know if we're necessarily seeing a massive reaction today. I think this is kind of confirming some of the fears that people already had.

43:58Dominic Chew: Stephanie, there has been a lot more movement with regard to other parts of the market that are kind of tied in some ways to that tech AI trade, notably the use of options, other types of vehicles. Have you seen any kind of movement with regard to more trading activity or more churn because of the catalyst that we've seen, especially with big tech earnings season kicking off? We've definitely seen a lot more activity in terms of the single names that are kind of right in the middle of it. But you've also actually seen them start to invest in certain sectors that I haven't actually seen before, energy being one, even though it's up a lot this year.

44:38And then on the option side, I actually haven't seen anything materially different than kind of in the past. It's usually short-term trading. And when volatility rises, that usually is a pretty good place to be if you're in the options market.

44:55Dominic Chew: Sure. And Marta, have you seen this setup kind of improve for the last couple of months of the year? Well, what's interesting is I guess when we see sell-offs like this in tech, it's a realization of some of the fears that are there. So I think in some ways this could be a better opportunity, a better setup, better valuations for some of these areas within the tech space if we're thinking longer term. And as we get through midterms, I think one of the big question marks, of course, is what happens geopolitically. And that could be something that the market has to contend with at least in the next few weeks.

45:30Dominic Chew: All right. And then, Joyce, as we kind of wrap things up here, I mentioned the setup. How exactly do the catalysts for you shape up for the last couple of months of the year in early 2027? Well, I think the markets are going to be focused on the midterm elections. They're also going to be focused on oil prices and what happens with the geopolitics, not just Iran, but also Russia, Ukraine, where you could see that with a split Congress, some of those tensions also come to the fore. And then there's also going to be this focus on just the whole AI CapEx ecosystem across equities and debt and what can be absorbed.

46:06And, well, retail investors actually look at this as more of a buying opportunity because very much as mentioned, I mean, there have been some signs that retail could come in.

46:14Dominic Chew: All right. Joyce, Marta Norton, Stephanie Guild, thank you very much for being part of the crew today and have a great weekend to all of you guys. All right. Thanks very much. And check out the markets right now, because, again, the NASDAQ is the big epicenter of the selling pressure off 675 points. Have a great weekend.

46:31Oh, look. You just got added to a meeting about coordinating another meeting to prepare for the pre-meeting ahead of the follow-up meeting, which will, of course, require a recap meeting. And then another meeting. Hit your booking point, book with Southwest, and enter airplane mode. you